After dipping to a four-month low at 16.22 per cent in the previous week, food inflation inched up yet again to 16.35 per cent for the week ended March 20 mainly on account of higher prices of milk and various pulses.

With the upward movement of food inflation coupled with the hike in fuel prices sending out clear signals of its cascading impact on the manufacturing sector and overall headline inflation, further measures to contain the price rise now appear a certainty when the Reserve Bank of India (RBI) unveils its credit and monetary policy on April 20. Already, the Wholesale Price Index-based headline inflation, which includes manufactured goods and all other non-food item groups, is pegged at 9.89 per cent for February and, going by the current rising trend, it may well cross the double-digit mark to settle at 10.5-11.0 per cent in March.

Last month, the RBI had hiked its key short term lending and borrowing (repo and reverse repo) rates by 25 basis points each to five per cent and 3.5 per cent, respectively, as a measure to contain inflation and check its spread to the manufacturing sector.

However, with the overall inflation already exceeding the RBI projection of 8.5 per cent for the fiscal year, economic analysts expect the apex bank to go in for another round of hike in key policy rates — Cash Reserve Ratio, repo and reverse repo — by at least 25 basis points each. Recently, Governor D Subbarao had also indicated that the RBI would gradually exit from its “soft and accommodative” monetary policy to check inflation and ensure sustainable growth.

In the near term, even as food inflation is expected to soften with the arrival of fresh crops, the increased cost of fuel is also expected to put pressure on prices.

As for prices of food items on a year-on-year basis, pulses were dearer by 31.55 per cent, milk prices by 18.74 per cent and wheat by 13.5 per cent. On a weekly basis, the index for food articles went up by 0.6 per cent owing to higher prices of pulses (moong, urad and arhar), barley, milk, and condiments and spices.

RELATED NEWS

Food inflation soarsApril 8, 2010

'Food inflation coming down'March 30, 2010

More In: Economy | Business